S&P 500 (Sep 10) INTRADAY
Review US equities continued their flight-to-quality yesterday reaching new 7 week lows with the e-mini S&P500 moving through key support at 1051.25. Another set of disastrous Housing Figures fuelled the extension to the downside with Existing Home Sales for July coming in below 4 million to record the slowest amount of activity in the market for 15 years as buyers re-main on the side-lines following the April expiry of the Government Tax credit. However, the subsequent downwards move in equities was far from plain sailing as a weakening US Dollar and speculation that this data may be the catalyst for further QE gave stocks a bounce.
Strategy Yesterday’s low at 1044 set immediately after the Housing data re-mains in place. The second wave of selling into the close yesterday only managed to result in a closing level of 1049.75. Continued good German economic data this morning offset an S&P downgrade of Ireland and a slightly disappointing Portu-guese bond auction to leave the E-mini S&P ranging around 1050. New Home Sales numbers will of course be the main focus today due at 15.00 UK time.
Alternative Scenario A better than expected New Home Sales may lead a retracement of some of the recent sell off and a move back above the Friday’s low of 1061.75
EUR/USD INTRADAY
Review EUR/USD continued its recent downward trend yesterday morning as the broad based flight-to-quality move contin-ues. Setting a new 6 week low at 1.2588. However, direction swiftly reversed due to dollar weakness following the disastrous Housing Figures fuelled the extension to the downside with Existing Home Sales for July coming in below 4 million to record the slowest amount of activity in the market for 15 years as buyers remain on the side-lines following the April expiry of the Govern-ment Tax credit. A sell off into the close brought EUR/USD back lower but the morning’s lows remained in tact.
Strategy Today we are neutral for EUR/USD. We have seen good German IFO being offset by a slightly disappointing Portuguese auction this morning. We have further US Housing data due at 15.00. Should these numbers be similar to Existing Home sales then we can expect EUR/USD to move higher on $ weak-ness - However, any strength may be short lived due to the overriding global flight-to-quality trade. This scenario exerts opposing forces on this market and therefore the net position may well be unchanged after short term volatility ends.
Alternative Scenario Better than expected New Home Sales may lead to a retracement of the recent sell off and a move above Monday’s high at 1.2730
Crude Oil (Oct 10) INTRADAY
Review Risk assets continued their flight-to-quality yesterday with Nymex Crude reaching a new 3 month October contract low taking out key support at $72.65. Another set of disastrous Housing Figures fuelled the extension to the downside with Exist-ing Home Sales for July coming in below 4 million to record the slowest amount of activity in the market for 15 years as buyers remain on the side-lines following the April expiry of the Government Tax credit. However, the downside was briefly interrupted due to a weakening US Dollar and speculation that this data may be the catalyst for further QE gave oil a bounce.
Strategy The low of $71.45 set immediately after the Housing data remain in place into the second wave of selling into the close resulted in new lows and a close of $71.63. The U.S. Energy Department will probably report today that crude stockpiles gained 300,000 barrels last week after three weeks of declines, a Bloom-berg survey showed. European stock indexes declined, led by shares of oil and gas companies this morning. New Home Sales numbers will of course be the main fo-cus today due at 15.00 UK time with DOE inventory numbers at 15.30.
Alternative Scenario A better than expected New Home Sales and a draw down in inventories may lead a retracement of some of the recent sell off and a move back above 5th July low at $72.65
